ROBERT W. VAN ZWIETEN MD, ASIA-PACIFIC ASIA CLEAN ENERGY FORUM 2020 - - PowerPoint PPT Presentation

ROBERT W. VAN ZWIETEN MD, ASIA-PACIFIC

ASIA CLEAN ENERGY FORUM 2020 MANILA JUNE 18, 2020

CONVERGENCE

WHAT IS CONVERGENCE?

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Convergence is the global network for blended

• finance. We generate blended finance data,

intelligence, and deal flow to increase private sector investment in developing countries. A GLOBAL NETWORK

We have a global membership of over 200 public, private, & philanthropic institutions

DATA & INTELLIGENCE

Original content builds the evidence base for blended finance, including data on past deals, trend reports, case studies, region and sector briefs, and webinars.

DEAL FLOW

An online match-making platform for investors and those seeking capital to connect on active deals.

MARKET ACCELERATION

Our Design Funding program awards grants for the design of innovative vehicles that aim to attract private capital to global development at scale.

CONVERGENCE

MEMBERSHIP COMPOSITION

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Convergence members are part of a global community of institutions and businesses dedicated to driving capital to where it is needed most. Member institutions include private investors looking to diversify their portfolios, businesses seeking capital, as well as public agencies and philanthropic foundations looking to make their funds go further. Convergence has over 200 member institutions, and over 1,000 staff at member institutions actively using the Convergence platform.

CONVERGENCE

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THE IMPORTANCE OF BLENDED FINANCE

Source: UNCTAD, June 2020

… 14% of global annual savings (USD 17 trillion) …1% of global capital markets (USD 218 trillion)

Putting the SDG funding gap in perspective The SDG Funding Gap is…

… 3% of global GDP (USD 76 trillion) 3.9 2.5 1.4 Total Annual Investment Needs Current Annual Investment Current Annual Investment Gap

Estimated SDG Investment Gap

USD trillions

CONVERGENCE

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DEFINING BLENDED FINANCE

PRIVATE CAPITAL Mobilizing BLENDED FINANCE STRUCTURES Market-rate Concessional DEVELOPMENT FUNDING

(Public/philanthropic funders)

Blended finance is the use of catalytic capital from public or philanthropic sources to increase private sector investment in sustainable development.

CONVERGENCE

KEY CHARACTERISTICS OF A BLENDED FINANCE TRANSACTION

Three signature markings that Convergence believes are important to a blended finance transaction

• 1. Leverage - Commercial capital mobilized by

concessional capital

• 2. Impact - Underlying activity contributes to the

SDGs in a developing country; however not all parties need to have development intent

• 3. Return - Transaction expected to achieve a

positive financial return; returns range from concessional to market rate and depend on the type of private sector investor in the deal

Return Impact Leverage

Blended Finance Transaction

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CONVERGENCE

BLENDED FINANCE TRENDS: OVERALL MARKET

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US $133B

mobilized to-date

3,800+

financial commitments 1170+ investors

69 85 110 140 176 222 265 314 358 406 452 490 521

$0B $20B $40B $60B $80B $100B $120B $140B 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Number of Transactions Closed Total Capital Committed (USD)

Aggregate Deal Count Aggregate Deal Flow

Source: Convergence, June 2020

CONVERGENCE

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BLENDED FINANCE EXAMPLE – CLIMATE INVESTOR ONE

• Invest in renewable energy projects that serve 7

million individuals in emerging countries and avoid GHG emissions of 1.2 million tons of CO2 equivalent

• Offers life-cycle support through three funds that are

designed to address barriers specific to each stage

• Mobilizes private sector financing through catalytic public

sector funding; investors and donors can participate in a fund and a tranche according to their risk-return profile

• Development Fund comprised of non-repayable donor

contributions while Construction Fund has first-loss tranche (Tier1) that is capitalized by donor contributions

• Recently announced financial close at USD 850 million

Development Fund USD 50 M Refinancing Fund USD 800 M Tier 1 Donor Capital 320 m Tier 2 Commercial Capital 320 m Tier 3 Institutional Capital 160 m USD 30 M USD 30 M Construction Equity Fund USD 800 M Development Loans & TA Equity Senior Debt

CONVERGENCE

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• CrossBoundary

Energy finances the construction,

• peration and maintenance of solar projects with the goal
• f establishing commercial and industrial solar as an

investable asset class in sub-Saharan Africa

• The Fund adopts an innovative two-tier equity capital

structure: USAID contributed junior class B equity (subject to first loss) in order to catalyze private investment into the larger Class A senior tier

• The fund in turn invests equity into SPVs that can also

raise debt leading to an increase in total available capital

• Donor aid agency can provide valuable support beyond

subordinate capital, such as signaling credibility and facilitating connections to relevant partners

Senior Class A Equity: Private Investors Junior Class B Equity: USAID Debt SPVs Invest equity in SPVs SPVs raise debt SPVs invest in Solar Projects

BLENDED FINANCE EXAMPLE – CROSSBOUNDARY ENERGY

CONVERGENCE

BLENDED FINANCE EXAMPLE - SUSTAINABLE LANDSCAPES IN EASTERN MADAGASCAR

• Project to enhance resilience of smallholders, reduce GHG

emissions and channel private finance into climate smart investments; 562,000 direct beneficiaries targeted

• Adaptation/Mitigation

activities implemented by public sector, funded through 1) GCF flow through grant of $15.3 m 2) GCF grant of $3.2 m for Climate Change Trust Fund

• Investment fund to target sustainable agriculture and

renewable energy; capitalized by 1) GCF $35m equity participation 2) $10m raised through the private sector via forgone coupon on the issuance of EIB green bond 3) $5.5m from EIB’s smallholder facility and fund manager

• Returns on GCF’s equity participation to be recycled into

Climate Change Trust Fund for adaptation/mitigation

Green Climate Fund Conservation International Climate Change Trust Fund (To be created) European Investment Bank Green Bond Issuance Investment Fund

Grant of $18.5 m Equity Participation

• f $35m

Capitalized at $50.5m Grant of $3.2m

Public Sector Climate Resilience Interventions Private Sector Investments

Financing of future activities Grant

• f

$15.3m Investments in Madagascar Return on Investments GCF portion

• f return on

investment

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CONVERGENCE

CONVERGENCE IS AN INDEPENDENT NON-PROFIT, WITH FUNDING FROM:

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CONTACT US:

General inquiries: comms@convergence.finance Membership: support@convergence.finance Design Funding: design.funding@convergence.finance Training: training@convergence.finance Website: www.convergence.finance

THANK YOU.